Investing in a mutual fund via SIP is a common approach among investors. In general, it helps investors to gain a significant amount of return over a long time period. To find out the same with the help of mutual fund SIP calculator, the investor has to enter the SIP amount, the rate of return and duration of the investment plan. But what if the investment is made via SIP on the basis of reverse calculation? Will it yield you the same return, or is it a dynamic approach of investment?
To find out the SIP amount, that has to be saved to reach the financial goal, the potential investors can take help of the reverse SIP calculator. It gives them a better prospect before making an investment. For instance, Mr Suresh has set his financial goal at Rs.30 lakh which he requires after 5 years down the line. But he is unable to configure the amount that he has to save within the stipulated time. Under such a situation, the reverse SIP calculator comes to rescue, as it helps to reckon the SIP amount that the investor has to put in every month to achieve his financial goal.
To make an investment in SIP prudently there are certain points that have to keep in mind before making an investment
The reverse engineering process simplified in 5 steps:
An important aspect of the reverse engineering process is the use of a mutual fund sip calculator. As there will be several calculations in this process at every stage, it is considered to have a handy mutual fund sip calculator at your beck and call. The steps are as follows:
Step 1: Keep in mind the financial return expected from investment
People invest to get a significant amount of return. However, the expected return shouldn’t go overboard. Even if the stock market has reported giving 50% in a particular year as in return, but it wouldn’t be the same for consecutive years. The experts suggest keeping a conservative assumption for the future rate of return. They also suggest that the investors should set their rate of return on the basis of the historical average.
Step 2: Time devoted to accumulating the return on investment
A certain amount of time has to be devoted to achieving your long term goals. For example, if a person decides to make an investment in ELSS for 2 years and contemplates to get Rs. 1 crore in return, then his/her plan is bound to fail. Hence, it becomes important to set realistic goals and let the fund grow over a certain period of time. Time devoted for investing can be varied and by using a mutual fund sip calculator to find out returns on each respective time period.
Step 3: How much corpus amount do you require to meet your goal?
The paramount interest of an investor lies in achieving the financial goal in the long term. However, most of the investors end up making blunders in the initial stage of the investment plan with the investment amount. It is better to have a foolproof plan to achieve your objective in the long run.
The investors will have to ensure that the amount decided is not handpicked randomly. They should have some bearing on reality. For example, to accumulate a corpus of Rs.1 crore, you should have a reasonable amount of saving to devote for SIP investment to meet your expenses in future.
Step 4: Achieving the financial objective while taking inflation into consideration
After figuring out the amount and the time you need to achieve the financial goal, the investor has to focus on the rate of inflation. Over a period of time, the prices of everything changes so with the change in certain factors the inflation rate will affect the financial decisions. The rate of inflation holds the power to reduce the value of money in future. Hence, it becomes important to inflate the final amount that has to be achieved in the long run.
After doing research and using the current rate, the investors may assume the rate of the price increase. The investor can take a realistic inflation rate such as 6 or 8 per cent. It works under most of the cases. The mutual fund SIP calculator can be used for this purpose as well, wherein by entering the rate of interest they can estimate the change in amount.
Step 5: Select the fund that is best for you
Now that you have accounted for the end goal, time period, inflation as well as estimated the amount that you would have to invest to reach your financial end-goal, now all that’s left is to match A to B. Confused? Here’s how what you need to do. There are several mutual fund sip options available, and selecting the right on for you will always be a tough decision. However, once you have mapped the end goal with the amount of capital you currently have that can be invested, you only need to focus on those funds that match require your current required capital to invest, and thus can easily filter out all of those options that do not match this amount.
Mutual fund SIPs are feasible for all. Whilst computing the various numeric elements of this process, be it a number of years, maturity amount etc, it is always recommended to use a mutual fund SIP calculator. The calculator comes to your rescue under such circumstance to ease out the investment plan. Make the best use of the calculator to achieve your financial goal and start with the investment plan prudently.
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